October 12, 2021

Terms of Issuance of Duty Credit under RoDTEP

With effect from 1st January 2021, Remission of Duties & Taxes on Exported Products (“RoDTEP”) scheme was introduced under Foreign Trade Policy (“FTP”) in replacement of earlier prevailing Merchandise Export from India Scheme (“MEIS”) and Service export from India Scheme (“SEIS”). Under RoDTEP, exporters of eligible products are entitled to receive a benefit in form of Duty Credit Scripts which can be further utilised for payment of taxes and eligible for resale as well.

The Scheme was made effective from 01.01.2021 itself and exporters are entitled to receive Duty Credit Scripts under this scheme by making necessary declarations in Shipping Bills. However, detailed guidelines such as Rate of benefits, terms, and conditions, etc. were prescribed later on.

Now, vide Notification No. 76/2021-Customs (N.T.) dated 23rd September 2021, the Central Government has provide the manner to issue duty credit for goods exported under the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme in accordance with Foreign Trade Policy. Benefit under the scheme shall be granted subject to such restrictions and conditions as specified in this notification.

1. Conditions of Issuance of Duty Credit

The duty Credit scripts shall be provided subject to the following conditions:

The duty credit shall be issued in lieu of any duty or tax chargeable on any material used in manufacturing or processing of goods or for carrying out any other operation in India on exported goods subject to the condition that such duty or tax or levy is not exempted, remitted or credited under any other scheme.
The duty credit shall be provided against the export of goods notified in Appendix 4R of FTP (vide Notification No. 19/2015-20 dated 17.08.2021) at the respective rate and cap notified in such appendix.

However, for the purpose of calculation of duty credit, value of exported shall be least of the following:

FOB value of said goods, or
1.5 times of the market price of the goods.
The duty Credit shall be provided with respect to such goods for which appropriate declaration at item level is made in the shipping bill or bill of export in the customs automated system.
Duty Credit shall be available for such goods for which shipping bill or bill of export is filed on or after 01-01-2021 subject to the condition that order permitting clearance and loading of goods has been made.
The duty credit shall be provided after the claim has been approved by Customs upon necessary checks, including on the basis of risk evaluation through appropriate selection criteria such as risk evaluation, and after filing of export manifest or export report.
Scripts shall be allowed in accordance with any rules or regulations issued in relation to duty credit, e-scripts or electronic duty credit ledger.
The duty credit shall be allowed subject to realization of sale proceeds in respect of such goods within the period specified under the Foreign Exchange Management Act, 1999. If consideration is not received within time limit allowed then such shall be deemed as ineligible.
Duty credit shall be allowed with respect to goods imported or exported through any of the following ports which allows electronic processing of bill of entry and shipping bills on the customs automated system:
- Seaports
- Airports
- Inland Container Depot
- Land Custom stations
In case an exporter has exported goods earlier and sale proceeds is released with respect to such export after expiry of the time period allowed for realisation, included period extended by Reserve Bank of India, then duty credit shall be allowed to the exporter.
- However, in such cases, Duty credit shall be issued by customs in excess of the ineligible amount of duty credit pertaining to the unrealized portion of sale proceeds against the export of goods made earlier.
- Further, if the Principal Commissioner of Customs or Commissioner of Customs has reason to believe that the claim filed for exported goods is not bonafide then he may allow duty credit for such exports after realization of export proceeds after recording reasons for the same in writing.
For Export made to exports made to Nepal, Bhutan and Myanmar, duty credit shall be allowed only upon realization of sale proceeds against irrevocable letters of credit in freely convertible currency established by importers of these countries in favour of Indian exporters for the value of such goods.

2. Utilisation of Duty Credit

The duty credit received shall be utilised payment of the Customs Duty leviable on import of goods under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

3. Exports ineligible for Duty Credit

Following export categories or sectors shall not be eligible for duty credit under this scheme.

Sl. No.	Export categories or sectors ineligible for duty credit
1	Goods which are restricted or prohibited for export under Schedule-2 of Export Policy in ITC-HS
2	Export of imported goods covered under paragraph 2.46 of Foreign Trade Policy
3	Exports through trans-shipment, meaning thereby exports that are originating in third country and terminating in third country but trans-shipped through India.
4	Goods subject to Minimum export price or export duty.
5	Deemed exports under Foreign Trade Policy. It includes supplies made to Export Oriented Units (“EOU”), Special Technology Parks (“STP”), etc.
6	Goods manufactured or exported by any of the units situated in Special Economic Zone/Free Trade Warehousing Zone/Electronic Hardware Technology park/Bio-Technology park/ Export Processing Zone
7	Goods manufactured or exported by a unit licensed as 100% Export Oriented Unit
8	Goods exported under Advance Authorisation or Duty-Free Import Authorisation issued under the relevant Foreign Trade Policy
9	Goods manufactured and supplied by units in Domestic Tariff Area to units in Special Economic Zone/Free Trade Warehousing Zone
10	Goods manufactured in Special Economic Zone/Free Trade Warehousing Zone / Export Oriented Unit / Electronic Hardware Technology Park /Bio-Technology Park/ Export Processing Zone and exported through DTA unit
11	Goods manufactured partly or wholly in a warehouse under section 65 of the Customs Act, 1962 (52 of 1962)
12	Goods availing the benefit of the notification No. 32/1997-Customs, dated the 1st April 1997
13	Goods for which claim of duty credit is not filed in a shipping bill or bill of export in the customs automated system
14	Goods that have been taken into use after manufacture.

4. Cancellation of Duty Credit

In following circumstances, duty credit granted to exported shall be canceled:

In case where a person contravenes any of the provisions of the Act or any other law for the time being in force in relation to exports or in relation to e-scrip then the Principal commissioner of customs or commissioner of customs, may cancel the duty credit or e-scrips after the enquiry.
Those e-scrip which are cancelled shall be considered as they have never been allowed to the exporter and the proper officer of customs shall recover the duty credit amount used or transferred in such e-scrip.
Proper officer of customs may suspend the operation of the above said e-scrip or the electronic duty credit ledger of such exporter or any duty credit transferred from such e-scrip, during pendency of the enquiry.

5. Recovery of amount of duty credit granted in excess

Recovery of excess granted Duty Credit shall be carried out in following situations:

Where the amount of duty credit granted to exporter is in excess of what the exporter is actually entitled to then such excess amount of duty credit shall be repaid by the exporter himself or on demand of the proper officer. Amount shall be refunded alongwith interest at the rate provided under Section 28AA of the custom Act, 1962 (Interest not below 10% but not exceeding 30%)..
Where exporter fails to repay excess amount of duty credit alongwith interest then such amount shall be recovered in the manner provided under Section 142 of Custom Act, 1962. Section 142 provides for the manner of Recovery of sums due to Government.
The Duty credit allowed in excess shall be deemed to have never been allowed to the exporter. Therefore, if the exporter fails to repay such amount alongwith interest within 15 days then the customs’ proper officer may take action against the exporter and proceed to recover the said duty credit amount in the manner prescribed in section 142 of the Custom Act, 1962.

6. Recovery of the amount of duty credit where export proceeds are not realised

An exporter is entitled to the benefit of Duty Credit subject to realisation of export proceeds in convertible Foreign Exchange within the time permitted under FEMA. In case where exporter fails to realise export proceeds then following action shall be taken against him for recovery of Duty Credit provided:

When duty credit has been allowed to the exporter but the sale proceeds with respect to exported goods have not been realized within the period prescribed under FEMA then the exporter repay the amount of duty credit granted in excess, alongwith interest, on his own or on the demand made by the proper officer. Interest shall be computed at the rate fixed u/s 288AA of the Custom Act, 1962. Amount shall be refunded within the period of 15 days from date of expiry of period of realisation.
In case any extension is granted by RBI and the exporter produces the evidence for such extension then the exporter is allowed to realise export proceeds within an extended time period. However, if he still does not realise the export proceeds then the exporter needs to pay the duty credit amount along with interest within 15 days from the expiry of that extended period.
In case, the part of sales consideration has been realised then duty credit pertaining to unreleased sales proceeds shall be refunded.
Where exporter fails to repay duty credit within 15 days then the proper officer of customs shall be allowed to recover such amount, alongwith interest, in the manner provided under Section 142 of Custom Act, 1962.
During the period of recovery of the amount mentioned above, no further duty credit will be allowed in subsequent exports till the time recovery of duty credit has been paid to the customs along with interest.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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